01_
Major operators will rationalise their
estates as they improve quality through
turnkey acquisitions or organic growth
02_
Fee profile and bank sentiment will see
more older stock come to the market at
affordable prices as vendor aspirations on
price adjust to meet those of buyers
03_
Distressed sales will again dominate and
provoke demand from buyers prepared to
invest in assets in a market fuelled by the
requirement for quality
04_
There may be some investment market
hesitancy leading up to the refinancing of
Four Seasons Health Care
Market
predictions
including Care UK, MHA, Maria Mallaband
Care Group and Four Seasons. Christie +
Co was also instructed to sell the only five
freehold premises held by Southern Cross
together with its domiciliary care business.
Corporate transactions at a premium
The stalling of transactions and uncertainty
in the care market caused by the ongoing
Southern Cross scenario came at a poor time
for a sector which had seen transactional
activity increase significantly and had seen
values increase by 0.4 per cent – the first
increase in three years.
The year started brightly with the sale of Priory
Group by RBS to Advent International in a deal
valuing the group at £925 million – reportedly
a nine-and-a-quarter multiple. Priory’s later
acquisition of the Advent-owned specialist
care provider Craegmoor was the only other
significant corporate deal to take place prior to
the Southern Cross lease-reassignments.
On the private vendor side, 2011 also began
slowly from a transactional perspective, but
picked up significantly in the second-half of
the year. This was largely the effect of estate
rationalisation by the major operators and a
growing amount of distress. Of the care deals
completed by Christie + Co during 2011, over
a third had a distressed background. This is
something we can expect a lot more of in the
year ahead as the economic climate shows little
sign of improving.
>>
2011
will go down as a year when
the care sector was very much a
tale of two markets.
The first saw corporate operators in a wait-
and-see limbo while the Southern Cross
scenario played out. The second market had a
regional backdrop, where transactional activity
was dominated by private sellers, older stock
and administrations.
Southern Cross was undoubtedly the story
of the year – certainly the one that most
exercised the minds of government, regulators
and the media. The uncertainty of all involved
and those that observed the situation couldn’t
be denied, yet what emerged, despite the
almost daily adverse headlines, was a strong
sector coming together to resolve the issue in
the best interests of service users.
What could have been a disaster instead saw
31,000
residents transferred to new operators
in a consensual and solvent manner, without
any detriment or hindrance to the ongoing
delivery, or quality, of their care.
The process saw the leasehold interest in
over 750 care homes reassigned by landlords
to operators including a new company formed
by Dr Chai Patel (HC-One) which is to operate
250
assets. Meanwhile, Four Seasons Health
Care expanded to become the UK’s biggest
care provider when it took over 130 homes.
Christie + Co acted on the assignment of over
60
homes on behalf of landlords to operators
Negative sentiment hits sector
The ongoing fee debate with local
authorities, lower occupancy levels and
a hitherto unsurpassed degree of media
antipathy towards the care sector – caused
not just by the Southern Cross situation but
also by BBC
Panorama’s
investigation into
allegations of mistreatment of service users
in the Winterbourne View care centre – all
conspired against a care sector already hard
hit by the economic climate.
These conditions have influenced how the care
sector is perceived by the public, investors,
and the Care Quality Commission (CQC). While
the CQC’s ratings system has now gone, care
providers can expect a more aggressive regime
of inspections in the future – but only if the
regulator is able to fulfil both this and its
additional duty to the NHS.
Key to the future
A significant factor in 2011 was the growing
trend amongst major operators to seek
turnkey developments. Christie + Co saw a
great deal of activity on this front during the
course of the year, acting on behalf of leading
developer LNT Construction to sell sites in
Derby (to MHA), Nottingham (to regional
operator Bank House Care) and in Sheffield
(
to Sanctuary Group).
2012
39
